Tuesday, October 23, 2012

Congress Should Follow Labor Law, Not Blow It Up

In April, after the counsel for the National Labor Relations Board found that Boeing(BA) violated labor law when it moved work to South Carolina, Congress went ballistic.

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Some Republican senators even threatened to dismantle labor laws that have existed since 1935, using a maneuver that typifies our dysfunctional Congress. The plan is to block replacement nominees to the NLRB, ensuring that the board has only two of the five required members. That way, it could not make any decisions! What a pitiful way to run a country.Fortunately, this is not the way that Boeing and the International Association of Machinists run their business. Rather, in October, they began to negotiate. As the IAM reported to members last week: "We did not publicly announce these talks, for reasons we know you understand. "In the past, we've gone through negotiations with media, politicians and bloggers second-guessing our moves and trying to determine the outcome while we work against a looming deadline," the union said. "To make a big public splash this time would have undermined what we were doing and would have gone against the reasons why we agreed to meet with the company in the first place."In six weeks, Boeing and its biggest union negotiated a global settlement that tentatively resolved three major issues, depending on a ratification vote.They agreed to a four-year contract. They agreed that work on the 737 MAX, the next generation of the bestselling airplane in history, would be done by union works in the Seattle and Portland areas. And they agreed not to pursue the NLRB case that has so rattled the Washington politicians. The deal also includes a $5,000 signing bonus on ratification.This is how things are supposed to work. It is fine to say that labor unions "rely on coercion, bullying and undue political influence to stay afloat," as South Carolina Governor Nikki Haley has done. But the IAM and many other unions realize full well that for members to succeed, companies must succeed too. That is why union President Tom Buffenbarger has frequently gone to bat for represented companies, why the IAM lobbied intensely to be sure that Boeing secured the contract to build 179 tankers for the Air Force at an estimated cost of $35 billion.

As for Boeing, the company has repeatedly admitted it made a multi-billion dollar mistake in executing a plan to establish a global production chain for the 787, outsourcing work around the world. Boeing, which is America's largest exporter, a Dow component, and a developer of technology miracles, was not going to make the same mistake twice.

And let's admit it, the NLRB case was a tough one. Yes, Boeing said the wrong thing when it declared publicly that it was putting some Dreamliner production in South Carolina in order to avoid the possibility of future strikes. But at the same time, Boeing is increasing production of the 787 and obviously is not obligated to build every single one of them in the same plant.

So the two sides went into negotiations and settled their differences with compromises on both sides.What a novel idea. Congress should try it some time. Readers Also Like: Jim Rogers: 2012 Investment StrategyNewt Gingrich: Fed Confused, Fire Bernanke